United States v. Lehigh Valley Railroad

Background

A large railroad company owned coal lands and created a coal company and a sales company to mine, buy, and market anthracite coal. Over decades the railroad bought mines and coal firms, controlled most tonnage on its lines, and set up a sales company whose stock and officers were tied to the railroad. A federal suit argued these arrangements combined to suppress competition and to control interstate coal trade.

Reasoning

The Court asked whether the railroad and its affiliated coal companies, including the sales company, used their ownership and contracts to restrain interstate coal commerce. It found the sales contract and the web of ownership were designed to prevent competing sellers and to keep coal traffic on the railroad’s lines. The Court relied on earlier decisions addressing similar sixty-five percent price and exclusive purchase contracts and concluded these arrangements unlawfully restrained trade under federal antitrust law and violated the federal rule against certain commodity-transport devices.

Real world impact

The Court reversed and ordered the intercorporate relations dissolved, declared the March 1, 1912 sales contract void, and directed that the companies be made independent so the sales company may freely buy and sell coal in competition. The decree dismisses the bill as to several unrelated defendants and remands to implement separation of stock, bonds, and property to ensure true independence.

Dissents or concurrances

Two Justices agreed with the result only because prior cases compelled it, while two Justices did not participate. Their views do not change the Court’s order here.